MNC Financial Inc.'s decision to suspend dividends on its preferred stock more than a year ago has led to defaulted payments of more than $9 million and has required the election of two new directors to the board, according to the company's proxy statement.
The statement, released Friday, asks preferred shareholders to vote for two new directors that the 20-member board has nominated to represent preferred shareholders.
One of those prospective directors doesn't even own preferred stock in MNC, Maryland's largest banking company. John J. Oliver Jr., publisher of the Afro American newspaper, said he is buying 100 shares and hopes to have completed the purchase before the annual meeting May 21.
Mr. Oliver was a director of Maryland National Bank before that board was combined with American Security Bank's board at the end of 1990 and remains a director of MNC's subsidiary, Security Trust Co.
Also nominated to MNC's board is Frederick O. Mitchell II, chairman of the Upper Chesapeake Health Systems and managing partner of F.O. Mitchell & Brother, a farming operation, says the proxy statement. Mr. Mitchell owns 300 shares of preferred stock.
The largest owner of MNC preferred stock is Bear Stearns Securities, a New York investment banking firm that, the proxy statement says, owns 684,000 shares, or 34.2 percent of the preferred stock outstanding.
Bear Stearns will not vote its shares, however, because Maryland law prohibits a shareholder from voting for a number of years after a controlling purchase is made, said Alan C. "Ace" Greenberg, the firm's chairman and chief executive.
Mr.Greenberg said Bear Stearns bought the MNC shares over the first half of 1991 for its account because it has "great faith in the new management."
He and MNC Chairman Alfred Lerner have been friends for about years, Mr. Greenberg said,calling it"one of the best relationships I've ever had."
The move to add two directors is the result of MNC's decision in December 1990 to suspend paying dividends on its preferred stock. As of the end of 1991, the company owed $8.9 million to owners of 2 million shares of adjustable-rate preferred stock.
MNC also owed $100,600 to the owners of 882 shares of convertible preferred stock because it failed to pay dividends of $11.25 a share last year and failed to redeem the stock at $100 a share Nov. 15, 1991, as required by the terms of the shares.
MNC agreed to enlarge its board if it remained in arrears on preferred stock dividends for six consecutive quarters, a point it reached after the first quarter of this year.
Under an agreement signed in the fall of 1990 with the Federal Deposit Insurance Corp.,MNC is prohibited from paying any dividends without the approval of federal regulators.